Earlier this year I wrote about ways that you could take credit card payments via the Internet, using a variety of online banking services. At the time I signed up with Intuit’s Merchant Services, and I was generally happy with them.

But I don’t get a lot of my clients paying me via credit card, and the fees were beginning to add up. Fortunately, there is a new game in town (quite literally, as some of the developers are based here in St. Louis) called Square. It is a great service, easy to use, tremendously easy to setup, and cheap. There is no fee for account activation, monthly banking, early termination, or anything other the actual card processing fee itself. You don’t have to buy anything: they send you the hardware gratis.

Most of the credit card machines that you see in retail stores use a dial-up phone line and have a small printer that will reel out your receipt and call the merchant bank to process the transaction. Square uses the Internet and email, which is appealing. So how does it work?

When you go to Squareup.com, you sign up for an account, and link it to your bank checking account. Like Intuit and other online merchants, Square makes a couple of deposits in the next couple of weeks and asks you to verify the amounts so they can be sure it is really your account. Then they send you the hardware in the mail in another couple of weeks.

The hardware is the most curious thing about Square: it a small piece of white plastic a little bigger than a quarter that attaches to the earphone jack on your iPhone or Android phone. Yes, your cell phone. You download the app (indeed, you have to do this first before you sign up, which is a nice touch) on your phone. The plastic has a groove it where you can swipe your credit card and initiate the transaction. The whole process is incredibly simple.

If you have an actual card present, you get charged 15 cents for each transaction plus 2.75% of the transaction. This is about typical for many card processors, and is a bit higher than what Intuit charges. If you don’t have a card present, you can still key in the card number and you will get charged 3.5% of the transaction plus 15 cents.

Square will transfer the funds to your checking account within a few days; again this is typical of many online solutions. They will hold anything more than a $1001 for up to 30 days, but you can get this ceiling raised if you contact their support department. They take any US-issued credit, debit and gift card.  When you login to your account using a Web browser, they have a series of reports to show your deposits and transactions.